Quarterly Financial Report December, 2008
EGE Haina Reports Fourth Quarter 2008 Losses of US$2.6 million; Revenues of US$92.6 million, down 10% Santo Domingo, Dominican Republic, April 13th, 2009 – EGE Haina announced today fourth quarter 2008 losses of US$2.6 million, compared to net income of US$21.6 in the fourth quarter 2007, driven by a decrease in energy sales price and lower demand. Fourth quarter 2008 revenues were US$92.6 million, showing a 10% decrease when compared with revenues for the same period of the previous year.
Financial and Operational Summary (US$ Thousands, except for Operational data) Description
4Q'08
4Q'07
Var %
FY'08
FY'07
Var %
Revenues
92,553
103,206
-10%
460,567
344,520
34%
Operating Costs
93,508
84,239
11%
402,057
289,308
39%
Variable Margin
22,702
39,109
-42%
127,437
124,103
3%
EBITDA
2,340
22,270
-89%
73,815
70,535
5%
Operating Income
(955)
18,967
-105%
58,511
55,211
6%
Net (loss) Income
(2,633)
21,496
-112%
38,573
37,972
2%
Operating cash, net
10,561
(35,294)
-130%
6,136
1,222
402%
Availability, %
92
99
-7%
91
97
-6%
Sales, GWh
496
544
-9%
2,146
2,172
-1%
Generation, GWh
357
395
-10%
1,439
1,674
-14%
Spot Purchase, GWh
139
149
-6%
707
499
42%
Quarter Highlights and Recent Developments On October 23rd, 2008 the Company paid the third interest coupon under the US$175 million Senior Notes. On October 29th, 2008 Ede Este and EGE Haina signed a contract to suspend the PPA signed in 1999 between the parties. The suspension is effective from November 1st and will last until EDE Este pays in full its current outstanding electricity bills with EGE Haina. As per conditions of the agreement, EGE Haina will continue to receive the revenues of pledged customers and credit card receipts for approximately US$6.0 million per month. On November 17th, 2008, the Company started the 48,000 hrs programmed maintenance to Sultana del Este’s Engine #9. This task lasted 12 days and was carried out without any issues to report. On November 26th, 2008 the Company entered into a Letter of Credit (LC) with Citibak for an amount up to US$3,014,000, in favor of Carbon and Minerals, LLC (coal supplier). The LC is collateralized with a time deposit held at Citibank. On December 4th, 2008, the Board of Directors authorized a dividend payment in the amount of US$20 million net of taxes. Payment was made on December 22nd, 2008. In January, 2009, the Company performed the 48,000 hrs maintenance of Sultana del Este’s Engine #4. Such maintenance took 10 days to be completed. On February 9th, 2009, the Company entered into an Agreement with CDEEE in which the latter offered to pay the outstanding accounts receivable generated during 2008 between the Company and Edenorte and Edesur in the concept of energy and capacity sales under the PPAs, for a total amount of US$77.0 million. The settlement of this debt was made in exchange for Sovereign bonds maturing in June 2010, 2011 and 2012; with interest accrual at 10.60% fixed rate and interest payable in semi-annual installments. The issuance of such bonds was approved by Law No. 490-08 of the National Congress of the Dominican Republic. On February 24th, 2009, the Board approved a dividend payment in the amount of US$40.0 million net of taxes that was paid 50% in cash and 50% with sovereign bonds under law 490-08 during March and April, 2009.
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Quarterly Financial Report December, 2008
External Factors During the quarter, fuel prices continued declining reaching a price of US$30.68 /Bbl for Platt’s US Gulf Coast HFO #6, 3% Sulfur (fuel used to index the energy price under our PPAs).
30 25 20 15
Exchange rate as of December 31st, 2008, closed at RD$35.57/USD.
10 5 -
Accumulated inflation in DR was 4.52% in 2008.
Q1
DR GDP grew 5.3% in 2008.
Q2
Q3
Q4
Q1
Q2
2006
Q3
Q4
Q1
Q2
2007
Q3
Q4
2008
PLATTS US$/MMBTU
LFO US$/MMBTU
CARBON US$/MMBTU
NG US$/MMBTU
Consolidated Financial Results1 Revenues (US$ Thousands) Description
4Q'08
4Q'07
Var %
FY'08
FY'07
Var %
Contracted Energy
75,629
94,522
-20%
416,974
310,339
34%
Contracted Capacity
8,773
8,520
3%
35,010
34,006
3%
Others
8,151
164
4868%
8,583
175
4812%
Total Revenues
92,553
103,206
-10%
460,567
344,519
34%
4Q’08 revenues decreased by 10% when compared with the same period of previous year (US$ 92.6MM Vs. US$ 103.2MM). The negative variance was mainly driven by the suspension of the EDE Este PPA in November 2008 (543.7 GWh in 4Q’07 Vs. 495.9 GWh in 4Q’08) and a 9.3% decrease in energy sales price as a result of the reduction in Fuel Oil prices.
Operating Expenses (US$ Thousands) Description
4Q'08
4Q'07
Var %
FY'08
FY'07
Var %
Fuel Expense
37,346
35,854
4%
158,105
128,108
23%
Transmission Tolls
2,570
3,406
-25%
12,834
15,263
-16%
Purchased Power
26,602
20,821
28%
143,238
63,416
126%
Capacity Rebilling
220
100%
1,104
Frequency Regulation
-156
495
-
-132%
1,667
1,707
-
100% -2%
Regulatory Payment
535
565
-5%
2,591
1,849
40%
Technical Advisory Fee
2,734
2,956
-8%
13,592
10,074
35%
Operating & Maintenance
7,512
8,285
-9%
31,085
30,766
1%
General & Administrative
12,851
8,554
50%
22,537
22,802
-1%
Book Depreciation
3,294
3,303
0%
15,304
15,324
0%
Total Operating Expenses
93,508
84,239
11%
402,057
289,308
39%
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The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (USGAAP). These consolidated financial statements include the accounts of EGE Haina, and those of its wholly owned subsidiary EGE Haina Finance Company. Intercompany balances and transactions have been eliminated in consolidation.
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Quarterly Financial Report December, 2008
During 4Q’08 operating expenses surpassed 4Q’07 comparative figures by 20% (US$93.9 MM Vs. US$78.4 MM). The rise in operational expenses is explained mainly by: Own generation: 4% increase in fuel expenses (US$37.3 MM Vs US$35.8 MM) mainly due to by the increase in coal costs by 78.4% partially offset by lower volume of coal and fuel consumed (3.7% in coal consumption and 6.4% decrease in fuel consumption). Purchased power: The 28% increase (US$26.6MM Vs US$20.8MM) is essentially as a result of the effect of higher purchases and higher energy prices in October 2008. During 4Q 2007 we bought a monthly average energy of 50 GWh at an average cost of US$132.8 GWh; but in October 2008 we bought 110.7 GWh at an average cost of US$174.2 million During November and December our energy purchases needs were lower because of the PPA suspension with Ede Este. General and administrative expenses: 68% increase due US$3.3 million increase in provision for doubtful accounts receivables and US$1.4 million increase in minimum income tax (based on assets). As a percentage of revenues, Operating expenses represented 101% and 76% in the 4Q’08 and 4Q’07, respectively.
Other Expenses (US$ Thousands) Description
4Q'08
4Q'07
Var %
FY'08
FY'07
Interest and Fee
(3,321)
(9,817)
-66%
(9,856)
(22,818)
-57%
5,061
4,630
9%
(737)
1,322
-156%
Exchange (Loss) Gain
193
(86)
-323%
443
274
62%
Total Other income (expenses)
1,934
(5,274)
-137%
(10,150)
(21,222)
-52%
Other (Expense) Income
Var %
During 4Q’08 other income were US$1.9 million, compared to other expenses of US$5.3 million in 4Q’07. This positive variance was mainly due to a US$5.5 million loss generated by a prepayment premium in 2007 and higher interest income in 2008 by US$0.8 million as well as US$0.3 million of foreign exchange gain.
Net (Loss) Income Net loss was US$2.63 million in the 4Q’08, from US$21.5 million net income in the same period of 2007. The main variances impacting net income were: i) US$16.4 million lower variable margin due to a decrease in energy sales and higher energy purchase; ii) US$11.4 million higher tax expenses, mainly deferred taxes due to a change in the inflation rate; iii) US$4.2 million higher Administrative expenses for the reasons explained above; iv) Partially offset by US$11.8 million lower interest expenses, net due to an increase in interest billed to the distribution companies, our clients.
Cash Flow Cash provided by (used in) operating activities Net cash provided by operating activities was US$10.6 million during the 4Q’08, compared to a net cash used by US$35.3 million in the same period of 2007. The most significant factors that increased the cash provided by operating activities were: a) US$73.8 million increase in accounts payable and accrued expenses; b) US$17.5 increase in payables to related parties; c) US$14.9 million decrease in other assets net; partially offset by i) US$47.4 million increase in accounts receivable; ii) US$24.1 million decrease in net income; and iii) US$9.9 million of higher positive adjustments reconciling net income to the net cash used in operating activities. Cash used in investing activities Net cash used in investing activities was US$8.4 million in the 4Q’08 and US$19.9 million in 4Q’07. The main factor that decreased the cash used in investing activities was the cancellation of short term investments by US$20.0 million in 2007, partially offset with the increase in 2008 of long term receivables by US$7.7 million and restricted cash by US$3.0 million.
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Quarterly Financial Report December, 2008
Financing activities Net cash used in financing activities was US$22.0 million in the 4Q’08, compared to a net cash used in US$5.4 million in the same period of the prior year. The main variations were that the Company paid dividends by US$20.0 million and repaid US$2.0 million in debt during the 4Q’08, while in 4Q’07 the Company repaid US$7.3 million of long term debt.
Financial Debt (US$ millions) Description
Dec'08
Dec'07
Var %
Short Term
1,703
12,441
Long Term
175,000
175,000
0%
Total Financial Debt
176,703
187,441
-6%
0%
0%
Foreign currency
100%
100%
Fixed rate
99.9%
99.5%
Variable rate
0.1%
0.5%
Local currency
-86%
Collections Collection rate for the 4Q’08 equaled 52% as compared to the 92% level of last year’s same quarter. In the 4Q’08 distribution companies had more than 90 days of their monthly power invoices in arrears, caused by a shortfall of funds from the subsidy of the central government to cover increasing fuel prices. During the 4Q’08, the three distribution companies have sustained their energy supply at 86.4% of the total demand. Naturally, this is not met by a proportional increase in collections from customers, (Cash Recovery Index for 2008 for Discos was 64%) thus creating the delay in payment to generators, including EGE Haina. The Dominican government, via CDEEE, entered into an Agreement with EGE Haina during the 1Q’09 in which the first offered a partial payment of the outstanding debt generated during 2008 between EGE Haina and the distribution companies through Sovereign bonds. The total amount of the agreement was US$77.0 million. Details in the highlight section.
Collections Vs Billings Q1 06 - Q4 08 140%
120%
100%
80%
60%
40% 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 Series 1 105% 74% 81% 70% 129% 83% 72% 92% 95% 108% 89% 52%
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Quarterly Financial Report December, 2008
Operational Statistics Description Heat Rate, Btu/KWh Availability, %
4Q'08 9,721
4Q'07 9,174
Var %
91.9
99.3
-7.5%
6.0%
Forced Outage Rate, %
6.6
0.1
6500.0%
Installed Capacity, MW
578
578
0.0%
Effective Capacity, MW
500
500
0.0%
296.51
338.95
Firm Capacity, MW
-12.5%
Energy Balance 580
GWh
430 280 130 (20) (170) 1Q06 2Q06 3Q06 4Q06 1Q07 2Q07 3Q07 4Q07 1Q08 2Q08 3Q08 4Q08 Spot
16
(78)
(133) (152) (105) (132) (116) (149) (123) (197) (237) (139)
Contracts
471
547
551
531
490
539
596
544
503
558
588
426
Generation
486
469
420
386
389
409
480
395
379
361
350
287
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Quarterly Financial Report December, 2008
EMPRESA GE ERADORA DE ELECTRICIDAD HAI A, S.A, CO DE SED CO SOLIDATED BALA CE SHEETS AS OF DECEMBER 31, 2008 A D 2007 Amounts in US$ Thousands
Dec-08 Assets: Current Assets: Cash and cash equivalents Restricted Cash Investments in certificate of deposit Accounts receivable Inventory Prepaid expenses and other Deferred income tax Total current assets Deposits in banks, restricted Long term receivables Property, plant and equipment Intangible assets, net Other assets Total Assets Liabilities and shareholders' equity: Current liabilities: Short-term debt Current portion of long-term debt Accounts payable Accounts payable to related parties Other Liabilities Total current liabilities Long-term debt, Deferred income tax Other non-current liabilities
Shareholders' equity: Common stock Legal Reserve Retained earnings Accumulated other comprehensive loss Total shareholders' equity Total liabilities and shareholders' equity
Dec-07
22,340 3,014 200,544 25,105 9,603 4,901 265,507
47,053 20,000 110,758 16,872 4,106 5,177 203,966
8,313 32,473 262,637 10,654 6,450 586,034
8,313 44,380 260,256 11,965 2,615 531,495
1,703 59,441 2,186 17,205 80,537
11,440 1,002 29,234 1,014 7,277 49,967
175,000 11,660 351 267,547
175,000 6,273 341 231,581
289,000 10,627 49,892 (31,032) 318,487
289,000 8,698 33,248 (31,032) 299,914
586,034
531,495 6
Quarterly Financial Report December, 2008
EMPRESA GE ERADORA DE ELECTRICIDAD HAI A. S.A., CO DE SED CO SOLIDATED I COME STATEME TS FOR THE YEARS E DED DECEMBER 31, 2008 A D 2007, A D FOR THE THREE MO TH PERIODS E DED DECEMBER 31, 2008 A D 2007 Amounts in US$ Thousands
Three month period ended December 31, 2008 2007 Revenues Energy Capacity Fuel Storage Other Total revenue
Operating Costs Fuel Operation and maintenance Transmission Tolls Purchase of Energy Purchase of Capacity Capacity Rebilling Frequency Regulation Regulatory Payment Technical Advisory Fee Administrative expenses Depreciation Total operating costs Operating Income Other income (expense) Other income (expense) Interest income Interest expense Foreing currency gain (loss) Total other income (expense) Income Before Taxes Income tax et Income
Year ended December 31, 2008 2007
75,629 8,773 357 7,795
94,522 8,520 160 4
416,974 35,010 482 8,101
310,339 34,006 167 8
92,553
103,206
460,567
344,520
37,346 7,512 2,570 26,082 520 220 (156) 535 2,734 12,851 3,294 93,508
35,854 8,285 3,406 20,039 782 495 565 2,956 8,554 3,303 84,239
158,105 31,085 12,834 139,252 3,985 1,104 1,667 2,591 13,592 22,537 15,304 402,057
128,108 30,766 15,263 57,858 5,558 1,707 1,849 10,074 22,802 15,324 289,308
(955)
18,967
58,511
55,211
4,630 7,385 (17,202) (86) (5,274)
(737) 30,331 (40,186) 443 (10,150)
1,322 21,805 (44,623) 274 (21,222)
13,694
48,361
33,989
(3,612)
7,802
(9,787)
3,983
(2,633)
21,496
38,573
37,972
5,061 8,158 (11,478) 193 1,934 979
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Quarterly Financial Report December, 2008
EMPRESA GE ERADORA DE ELECTRICIDAD HAI A. S.A., CO DE SED CO SOLIDATED CASH FLOW STATEME TS FOR THE THREE MO TH PERIODS E DED DECEMBER 31, 2008 A D 2007 Amounts in US$ Thousands Three Months Ended
Year ended
December 31,
December 31,
2008
2007
2008
2007
Cash flows from operating activities Net income Gain on settlement on interest on tax assessment Deferred Income Tax Depreciation and amortization Provision for doubtful accounts Financial interest Gain on Sales of fixed assets Accounts receivable Inventories Prepaid expenses Other Assets net Accounts payable and accrued expenses Payables to related parties Other Liabilities Other Non Current Lialibities Net cash provided by (used in) operating activities
(2,633)
21,496
38,573
37,972
4,006 2,361 3,300 4,277 (68,669) 8,076 (2,506) (3,808)
(1,056) (7,802) 9,630 3,442 (21,313) 4,767 (610) (18,698)
5,662 15,304 3,300 4,277 (143,598) (8,233) (5,497) (3,836)
(1,056) (3,983) 15,324 10,739 (325) (61,196) (2,014) (2,271) (2,317)
72,475 (1,915) (4,404) 1
(1,331) (19,393) (4,390) (36)
92,621 590 6,963 10
33,544 (19,393) (3,565) (237)
10,561
(35,294)
6,136
1,222
(3,014)
3,632 -
(3,014)
3,632 -
1,471
(2,799)
(17,098)
(3,329)
868
(20,000)
20,000
325 (20,000)
(7,717)
(698)
-
-
(8,392)
(19,865)
(112)
(19,372)
(1,496) (501) (20,000) -
3,152 (7,396) (1,238) -
(9,736) (1,002) (20,000) -
(2,465) (95,107) (5,675) (13,973) 175,000
(21,997)
(5,482)
(30,738)
57,780
(19,828)
(60,641)
(24,714)
39,630
42,167
107,694
47,053
7,423
22,340
47,053
22,340
47,053
Cash flows from investing activities
Net changes in deposits in banks – restricted Net changes in restricted cash Purchases of property, plant and equipment Sales of Property, plant and equipment Changes in Short Term Investment Changes in Long Term Receivables Net cash used in investing activities
Cash flows from financing activities Net changes in Short Term Debt Repayment of Long Term Debt Dividends Debt issuance costs paid Repayment of related parties debt Proceeds from Long Term Debt Net cash (used in) provided by financing activities Net increase (decrease) in cash Cash at the beginning of the period Cash at the end of the period
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Quarterly Financial Report December, 2008
The consolidated financial statements presented herein have been derived from the 2008 audited financials of the Company. Such audited financial statements were presented in conformity with Generally Accepted Accounting Principles in the United States (USGAAP). EGE Haina is the largest generator of electricity in the Dominican Republic, currently operating 11 electric power generation units at six plants, consisting of San Pedro, Sultana del Este – barge, Haina and Barahona in the southern part of the country, Puerto Plata in the northern and Pedernales in the western part of Santo Domingo. EGE Haina has contracted approximately 96% of its power generation to the three Dominican Republic distributors. For more information, visit the Company's Web site at www.egehaina.com. Caution Concerning Forward-Looking Statements: This report may contain “forward-looking statements”- that is, statements related to future, not past, events. In this context, forward-looking statements often address our expected future business and financial performance, and often contain words such as “expect,” “anticipate,” “intend,” “plan,” believe,” “seek,” or “will”. Forward-looking statements involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of the Company may differ materially from those expressed or implied by such forward-looking statements and assumptions. For us, particular uncertainties that could adversely or positively affect our future results include, but are not limited to: changes in general economic, political, governmental and business conditions; the behavior of financial markets; changes in commercial market regulations. These uncertainties may cause our actual future results to be materially different than those expressed in our forward-looking statements. EGE Haina assumes no obligation and does not undertake to update forward-looking statements.
Investor Contact: Please address any questions or comments related to this report to our investor’s e-mail: hainainvestors@egehaina.com.
9